PC Market Mess: 8 Takeaways

The PC market continues to slump but not all PC makers are suffering equally. We break down the winners and losers.

8 Phablets To Watch

(click image for larger view)

Research firms Gartner and IDC each released new statistics Wednesday that suggest global PC shipments slipped around 8% in the third quarter of 2013, the industry's sixth consecutive quarter of contraction. The baseline was last year's woeful third-quarter performance, when the PC slump was already underway; as such, the newest decline is in a sense even worse than it seems.

Even so, the third quarter wasn't an out-and-out disaster for all involved. Who were the winners and losers? Here are eight takeaways on the state of the PC industry.

1. The U.S. outperformed the global market but consumer sales are still poor.

As usual, IDC and Gartner agreed on the broad strokes but disagreed on the details: IDC said the U.S. contracted only slightly, whereas Gartner concluded U.S. shipments actually increased 3.5%. Shipments were very poor in the Asia/Pacific region, excluding Japan, and throughout Europe.

Both firms suggested inventory refreshes and enterprise sales drove U.S. shipments -- so don't take the relatively healthy numbers as evidence of a consumer rebound. Consumer PC sales are typically high during third-quarter "back to school" promotions, but Gartner analyst Mikako Kiagawa said in a statement that third-quarter sales were at their lowest since 2008.

2. Lenovo is the PC market's clear winner.

Lenovo not only remained the world's top PC maker, with around 17.5% of all units shipped, but also enjoyed a bigger year-over-year increase in shipment volume than any of its competitors. Lenovo placed fourth in the United States -- behind HP, Dell and Apple -- but nonetheless made gains. It snared 10.5% of the market, up from around 8.5% from a year ago and within striking distance of third-place Apple.

3. HP and Dell earned qualified wins.

HP ranked second worldwide and first in the U.S., and it increased its market share in both categories. Dell ranked third worldwide and second in the U.S., increased its worldwide market share, and -- depending on whether you trust IDC or Gartner -- was either slightly up or flat in U.S. market share. Both HP and Dell shipped slightly more units than they did the year before. All in all, it's an encouraging showing, given the overall market conditions.

But both companies face concerns. Neither has established itself as a strong mobile brand. Both are still adjusting, as HP CEO Meg Whitman alluded this week, to the PC slump's ripple effects: Microsoft now competes with its own OEMs via its Surface line; Dell and HP can no longer support their device businesses via Windows alone and are turning toward Android and Chrome OS; and so on. HP's and Dell's third-quarter success also deserves an asterisk because both relied to some extent on low-margin hardware, which doesn't really help the bottom line.

4. Enterprises still need PCs.

Windows XP will lose service in April but still ran on more than 30% of the world's PC's in September. Microsoft COO Kevin Turner said last month at the company's meeting for financial analysts that 21% of Microsoft's corporate customers were still using the operating system. Analysts have said for months that XP's retirement could help PC sales, with XP holdouts buying new machines as they move to Windows 7 or Windows 8. Both IDC and Gartner saw evidence of this trend in Q3.

Consumers have moved aggressively toward tablets, and slates are carving out roles in the workplace as well -- but the data is a reminder that many businesses continue to rely on PCs. Nonetheless, neither IDC nor Gartner project that modest enterprise sales will stop the PC slump, which both firms expect will continue into 2014.

And, there's the fact that as PCs become more powerful and higher-quality, they have longer useful lives. We just did some inexpensive upgrades to a six-year-old Toshiba laptop and it's running just fine. It's heavy, so no one will be carrying it around, but as a task device, it's great.

Absolutely. It's not that consumers don't buy PCs anymore; it's that PCs have become purpose-specific for many consumers, with tablets taking over general use tasks. That means a household that used to have three laptops might now have one computers and a couple tablets. The lone remaining computer will get upgraded less frequently while the tablets will be upgraded more frequently. This cycle will likely get disrupted again, to some extent, as phablets and wearables become more ubiquitous.

I wonder if there's a tendency for consumers to hold onto an existing PC or laptop longer (resist upgrading) if they are spending more of their time with their tablet, making that their essential device and the PC more of a backup.

Just because the server market's in the doldrums doesn't mean innovation has ceased. Far from it -- server technology is enjoying the biggest renaissance since the dawn of x86 systems. But the primary driver is now service providers, not enterprises.